The Hindu Business Line : Trading blind-folded

The WTO agreements have been the subject of seminars, workshops and colloquia. Yet the information on the factual situation in each member-country remains densely clouded. No country knows what and how many weapons of economic mass destruction its partners in trade are accumulating, says Sharad Joshi.

THE STATED objective of the World Trade Organisation is to minimise distortions caused by state interventions. As the former US President, Mr Bill Clinton, said in his address to the World Economic Forum in Davos on January 29, 2000, open markets do create jobs, they do raise incomes, they do spark innovations and spread new technologies, they do, coupled with the explosion of international communications through the Internet, which is the fastest growing network in history.

The eight-year-old baby does not appear to have got over its teething troubles.

Free markets tend to bring about division of labour on the basis of the principle of comparative advantages. The partners in the free trade are not supposed to be identical clones; they are supposed to have distinct identities on the basis of their historical, social, cultural and geopolitical characters. The first round of difficulties for the WTO came with some countries wanting to impose uniformity in the structures relating to production the world over. They wanted the regulations on environment, even in developing countries, to come up to the standards of the developed countries.

They insisted that bonded labour and child labour should go forthwith and that labour laws should conform to international standards. Briefly, they wanted technology to remain the only source of economic advantage. That would have been derogatory to the principle of comparative advantage and defeated largely the basic objective of the WTO. Fortunately, the all this has been kept in animated suspension, at least for the time being.

The second bout of troubles came with anti-WTO, anti-globalisation and anti-technology non-governmental organisations (NGOs) mobilising large crowds of demonstrators with the objective of scuttling the negotiations or, at least, change the environment of the negotiations.

A far more serious crisis is developing in the post-11 September 2001 era. The global campaign against terrorism has had its effects on the trade environment. For some time, one side to the war has been crying victory in a cacophony of jingoistic jubilation. The fact is that there is no winner in any war; there are, at least, two losers.

Maintenance of international agreements on abolition of weapons of mass destruction was, at least, one cause that led to the attack on Iraq. The application of the Bush doctrine is not seen to be uniform the world over. The US seems to have different standards about international probity varying from country to country.

The fact remains that the war in Iraq has brought to an end an era of international agreements that were based on voluntary disclosers by countries of their situation and implementation on international commitments. The anti-war feeling is now at a peek and the Seattle-like demonstrations can be expected to be even more boisterous hereafter.

Under the Agreement on Agriculture, member-countries made certain commitments about market access (tarrification), domestic support and export competition. The WTO set the rules of the game, laid down timetables for implementation and mechanism of dispute settlements. So far so good.

Unfortunately, the rules of the game, particularly in the area of domestic support, dumping, sanitary and phyto-sanitary measures and non-trade barriers were drafted by people who lacked a fundamental faith in the efficacy of market forces to correct any mischief.

The WTO relied on a quasi-judicial mechanism of adversarial arguments. The WTO structures have, inevitably, being taken over by a new tribe of lawyers and jurists. Their arguments and jurisprudence are beyond the comprehension of a common citizen.

Access to the redress machinery of the WTO is not physically possible except through the agency of national governments. Consequently, there lies a real threat that the WTO agreements, far from diminishing the clout of the state, might actually make the state a more powerful agency than before Marrakech.

The member-countries of the WTO made their own declarations about the three basic programmes, that is, access, domestic support and export and they were accepted in good faith. It is only much later that the countries, particularly in the developing countries, started realising the subtly devious tricks that could be played by juggling green, blue and amber boxes.

The richer countries have, on their own part, started realising the importance of the multifunctional character of agriculture as also adverse effects of the Agreement on Agriculture access provisions, albeit short term, on domestic employment. The US, the European Union and Japan as also the Cairns countries are carrying on a highly polemical debate in a jargon that is understood less and less by the farmers world over who are the primary interested party.

The post-11 September 2001 scene has resuscitated the jingoistic nationalism of protectionists, even in countries that have traditionally stood for free trade and democracy.

Mr Saddam Hussein was accused of surreptitiously developing and stockpiling weapons of mass destruction contrary to the spirit and the word of the international agreements. Major countries that were infuriated by Mr Saddam Hussein's machinations are themselves trying to develop escape routes for withdrawing from the commitments under the URA.

The environment of international good faith and innocence stands breached and may stay breached for some time to come. Agricultural subsidies in richer countries are potent weapons of mass destruction as far as the peasantry in poor countries is concerned.

These latter accepted the Agreement on Agriculture conditionalities in the hope that that will create, at least, a moral force for making the richer countries accept and enforce them. The domestic support conditionalities of the Agreement on Agriculture are faulty, at least on three counts:

1. Keeping a fixed 1986-89 period for hypothetical referral prices makes little sense, particularly during the period of long recession and changing exchange rates.

2. The richer countries have far greater capacity to play with rules and boxes of diverse colours than the poorer ones.

3. The Agreement's prescription would make more sense if it were based on comparison between domestic costs and domestic prices rather than between domestic prices and international referral prices.

The WTO agreements have been the subject of seminars, workshops and colloquia than any other subjects in recent times. The information on the factual situation in each member-country, nevertheless, remains densely opaque. No one knows what and how many weapons of economic mass destruction are being accumulated by their partners in trade.

The UN system had to devise an inspection system and inspection mechanism for investigating cases of nonconformity with international commitments.

The WHO recently had to intervene in China for the investigation of the SARS situation. The WTO would need to establish a system of information gathering and inspection so that URA is rescued from the pedantry of the academics as also the legalistic arguments of the modern-day Shylocks. I agree that the time is still not ripe for the international system to devise an inspection mechanism that would be readily acceptable to all member- countries. There will be harangues about encroachment of national sovereignty.

The WTO has survived those enthusiasts who sought to impose uniform production structures in all the three worlds. It is trying to extricate itself from the clutches of the jurists. It needs to develop a mechanism for overcoming the pedantry of the academics vulnerable to political influences.

(The author is Founder, Shetkari Sanghatana. He can be contacted at sharad@mah.nic.in)

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